CMSI in deal to be acquired

California company agrees to pay about $52 million

January 31, 2001|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

A California company has agreed to acquire Credit Management Solutions Inc., an Annapolis Junction business that makes software for lenders to check loan applications, for about $52 million in stock, the companies said yesterday.

The deal between the two publicly traded companies - CMSI and First American Corp. of Santa Ana, Calif., - is expected to close in the second quarter of this year.

The offer amounts to a premium of as much as 2.5 times CMSI's Monday close of $3.75. Shares of CMSI rose nearly 72 percent yesterday, gaining $2.69 to $6.44. Shares of First American lost $1.21 to close at $30.79.

Under the terms of the agreement, CMSI stockholders would receive between 0.28 and 0.21 shares of First American for each of their CMSI shares, depending on First American's stock price at the time the deal closes.

First American provides information to consumers and businesses. Its real estate division, for instance, provides professionals in the industry with information on topics such as flood zones and property taxes. And its consumer information and services division does, among other services, background checks of potential employees.

CMSI, founded in 1987, fits into First American's consumer segment because it develops and sells software that automates the lending process and lets lenders check borrowers' credit history. It also makes software that connects car dealers with the lenders with which they do business.

"The acquisition of CMSI represents another major advancement in our strategy to expand our consumer information segment," said Parker S. Kennedy, president of First American.

Charles F. Gunther, an analyst at Wells Fargo Van Kasper, said the acquisition works beautifully for First American, which has spent years building up a part of its company to complement real estate services.

"They're focusing in a big way on the automotive sales and financing area," he said.

As part of the acquisition, CMSI will become First American CMSI. The company will continue to operate in Annapolis Junction as a subsidiary of First American.

The companies said holders of 49 percent of CMSI shares have agreed to vote in support of the merger, which is expected to add to First American's earnings next year.

"We intend to retain a large part of what we do," said Scott L. Freiman, founder, president and chief executive of CMSI. "We're basically continuing to do the same thing we do today, but as part of a bigger company."

Freiman plans to stay with First American CMSI and have a major role in the business. Freiman said five of the company's approximately 200 workers will lose their jobs as part of the acquisition, but he does not anticipate many more job losses.

CMSI - which went public in 1996 and raised $27 million in its initial public offering - was named one of the state's 50 fastest-growing technology companies in December, according to an annual ranking by Deloitte & Touche.

The company was not profitable in the quarter that ended Sept. 30, but Freiman said he had been expecting it to be profitable this year.

The acquisition, he said, is not an indicator of cash problems or financial duress. CMSI simply wants to grow quicker so it can dominate the market.

"We can help [First American] grow their business faster," Freiman said, "and by hitching our wagon to a bigger company ... we can now grow a lot faster ourselves."

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